Reverse Mortgages

What is a Reverse Mortgage?

A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a type of loan that allows homeowners 62 years or older to convert part of the equity in their home into tax free money. Originally conceived as a means to help senior homeowners with limited income use that equity to pay off debts (including traditional mortgages), cover basic monthly living expenses or pay for health care, new rules and regulations have helped reverse mortgages become a valuable tool in an overall financial plan.

Why Choose a Reverse Mortgage over a Traditional Home Equity Loan?

To qualify for a traditional home equity loan or line of credit, you must have good credit and a sufficient income stream to maintain the loan payments. With less stringent income and credit requirements, a reverse mortgage makes it easier for those individuals on a fixed income or without a steady income to qualify for a loan. And, they are backed by the U.S. Department of Housing and Urban Development (HUD) and are insured by the Federal Housing Administration (FHA).

Eligibility Requirements for a Reverse Mortgage

  • The home must be a primary residence.
  • One borrower in the primary residence must be at least 62 years of age.
  • Residence must be a single family home, multi-family home up to four units, or a HUD approved condominium.

Reasons to Consider a Reverse Mortgage

Stay in your Home

Instead of making monthly payments on your traditional mortgage, a reverse mortgage can help you tap into the existing equity that you’ve built up over the years to receive additional payments from that equity.

Medical Bills

The funds from a reverse mortgage can help bridge the financial gap for medications, treatments, long-term care, or other medical expenses not covered by Medicare/Medicaid or other health insurance providers.

College Fund

Help fund a child or grandchild’s education expenses and reduce the burden of costly student loans for them.

Help Family or Friends

The funds from a reverse mortgage can help family members or friends in need of financial assistance.

Home Improvements

Use the existing equity in your home for household projects or renovations.

New Home Purchase

Help a family member purchase a home, or use the proceeds to purchase a new primary residence for yourself.

Debt Consolidation

Consolidate and pay off credit cards, car loans, and other debt.

Investment Portfolio

A reverse mortgage can be an additional strategy in a diversified investment portfolio.

How Much Money Can I Get?

The amount of money available from a reverse mortgage is dependent on two key factors:
  • At least one homeowner needs to be 62 years of age.
  • The more equity you have in your home, the more money will be available to you.

How Can the Proceeds from a Reverse Mortgage be Distributed?

You have the option to receive payments in any of the following methods or a combination of them:
  • Lump sum
  • Monthly
  • Credit line

Who Owns the Home and How is the Reverse Mortgage Paid Back?

The borrower retains ownership of the home at all times. If they decide to sell their home, move to another primary residence, or if they pass away, the borrower(s) or their heirs have the option to:

1. Keep the House

By repaying the balance of the reverse mortgage.

2. Sell the House

And pay off the balance of the reverse mortgage from the proceeds of the sale.

3. Walk Away from the Home

And let the lender take ownership. Since a reverse mortgage is a non-recourse loan, there is no additional personal liability.

How Do I Get Started?

This website provides a broad overview of the reverse mortgage program and its benefits. For additional information, speak with one of our experts for a free consultation to determine if a reverse mortgage is the best product for your financial needs. In addition, the U.S. Department of Housing and Urban Development (HUD), who insures and regulates this program, requires that all potential applicants speak with a HUD approved counselor before proceeding with a reverse mortgage application.

If you feel that a reverse mortgage might be suitable for you or a family member, or have additional questions, please call us at 631.424.5100.

Disclosure: These materials are not from HUD or FHA and were not approved by HUD or a government agency.